Latest Stories

The rules on providing client records

Suppose a CPA who prepared a client’s tax returns receives a request
from the client that the CPA transfer all of the client’s tax records
to a new firm. The client includes the appropriate Sec. 7216 consent
to disclose authorization to transfer the records. What are the CPA’s
responsibilities and obligations?

Multiple authorities must be considered. First, the CPA should refer
to Circular 230, Regulations Governing Practice Before the
Internal Revenue Service (31 C.F.R. Part 10), Section 10.28,
which states that a “practitioner must, at the request of a client,
promptly return any and all records of the client that are necessary
for the client to comply with his or her Federal tax obligations.”

Records of the client are defined by Section 10.28(b) as “all
documents or written or electronic materials provided to the
practitioner or obtained by the practitioner in the course of the
practitioner’s representation of the client, that preexisted the
retention of the practitioner by the client.” Records of the client
include materials that were prepared by the client or a third party,
such as an investment manager or a bank or a brokerage firm, and
provided to the practitioner to prepare the requisite tax returns.

The term “records” also covers any return, schedule, appraisal, or
any other document prepared by the practitioner that was presented to
the client with respect to a prior representation if such document is
necessary for the taxpayer to comply with a current federal tax
obligation. The term does not include any return, schedule, or any
other document prepared by the practitioner if the practitioner is
withholding the document pending the client’s performance of a
contractual obligation to pay fees with respect to the document.

In addition, the CPA should consider the AICPA Code of
Professional Conduct, specifically ET Section 501.02, Acts
Discreditable, Interpretation 501-1, “Response to Requests by
Clients and Former Clients for Records.” Under this section, when a
client or former client requests that the client’s records either be
sent to the client or forwarded to another CPA, a member’s failure to
comply with the request would constitute a violation of this
interpretation. “Client-provided records,” as defined in this
interpretation, are “accounting or other records belonging to the
client that were provided to the member, by or on behalf of, the
client, including hardcopy or electronic reproductions of such
records.” As can be seen, the definition of records for purposes of
Interpretation 501-1 is much broader than the definition used in
Circular 230.

In addition, AICPA members are encouraged to comply with the rules
and regulations of authoritative regulatory bodies, such as the
member’s state board of accountancy, when the member performs services
for a client and is subject to the rules and regulations of such
regulatory body.

For a detailed discussion of the issues in this area, see “Current
Tax Return Disclosure Issues Involving Sec. 7216,” by Thomas J.
Purcell III, CPA, J.D., Ph.D.; Barbara Bond, CPA; and Gerard H.
Schreiber Jr., CPA, in the August 2013 issue of The Tax Adviser.

—Alistair M. Nevius, editor-in-chief

Also look for articles on the following topics in the August 2013
issue of The Tax Adviser:

The results of the 2016 presidential election are likely to have a big impact on federal tax policy in the coming years. Eddie Adkins, CPA, a partner in the Washington National Tax Office at Grant Thornton, discusses what parts of the ACA might survive the repeal of most of the law.